Business research news, tips, facts and sources from the Library research team at the London Business School Library.

08 September 2010

Trends in Lending

This publication presents the Bank of England’s assessment of the latest trends in lending to the UK economy. The data set covers the major UK lenders: Banco Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland. Together they accounted for around 65% of the stock of lending to businesses, 45% of the stock of consumer credit, and 75% of the stock of mortgage lending at the end of 2009.

Executive summary from report

The flow of net lending to UK businesses remained negative in June. The stock of lending to all the main sectors of the economy contracted in 2010 Q2. Some major UK lenders reported that spreads on lending to larger corporates continued to fall, but by a diminishing amount. Spreads on lending to small and medium-sized enterprises were little changed. Contacts of the Bank’s network of Agents noted that credit conditions for smaller businesses remained tighter than for larger corporates, with demand for bank finance generally remaining weak.

The flow of net mortgage lending by all UK-resident mortgage lenders was little changed in June. Gross lending for house purchase in July was similar to that in June, though approvals for house purchase edged down according to data from the major UK lenders. Some major UK lenders reported that recent higher longer-term funding costs had contributed to a rise in spreads on longer-term fixed-rate mortgage products. The overall effective rate on new mortgages was little changed in June.

The flow of net consumer credit decreased in June, though the annual growth rate of the stock of lending remained broadly unchanged and close to zero. Effective interest rates on credit cards increased slightly in June, while rates on personal loans edged lower. Most major UK lenders reported no significant changes in credit availability or demand in July.